If you're new here, this blog will give you the tools to become financially independent in 5 years. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger on losing their jobs to the next wave of downsizing.
Here's more than a hundred online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before delving into the forum journals and looking for the crowd's wisdom for your particular situation.

Following the HUGE forum discussion of the ethics of extreme early retirement which resulted in 133 (and counting) responses. Sawbones Surio wrote a very useful thread summary on the forums. Since more people still read the blog compared to the forum, I asked him if he would be willing to turn it into a summary for the blog. Here’s part 1 of what he sent me. (You might want to read it together with the Borsodi post.)

Minor Preamble:
To me, the “concept of ERE” needed no explanation or understanding. It formed an instant connect because, in spelling it out, Jacob has tried condensing very many unifying themes. For instance, when I introduced the ERE site to my brother, his first response was “Ah, great! Looks as if we’re doing most of it in our lives already” :-). So, beware: you are reading the words of a ‘practicing journeyman’ (not ERE’d yet) :-D!

Before the forums came about, Jacob had to set about writing “clarification posts” about definitions and ideas that form ERE philosophy’s backbone. One of my favourites from those, is this one called “Blog comments in a parallel universe”. It sensitised me to things such as:

What “collective conscious” truly can be, and how it shapes “individual thinking”.

How much we become a “product of our times” without even our necessarily realising it, and,

A change in mindset needed to understand ideas going against ingrained thought patterns or one’s own ways of life.

With these points as my motivation, I’ve gone about this write-up on (Hat Tip: @Maus) “The way of the ERE”. Enjoy.

A sure sign that things are *not* tickety boo with the world (and forum membership comments seem to assert to this fact), is the number of relatively new readers who discover the blog though the “early retirement” keyword search! But, when they read on, they find that ERE requires a fundamental thought shift. So, let’s take a minute to understand, what exactly is ERE?

Assuming you are in your 20s, and have started work straight after college with no accumulated debt, then with a *high* savings rate all you need to do is work for 10 years straight, and you become “ERE”. Whoa! Yes. It is as simple as that, and it is aided by the following:

Save 70% of your income, and you can actually take 2y-4m off every time you work 1 year. With this savings rate, work 10 years straight and you can call it quits.

Save 50% of your income, you can take 1 year off every time you work 1 year. With this savings rate, work ~20 years straight and you can call it quits.

A low-impact lifestyle, reinvestment of your savings, compound interest, etc., and Your annual expenses < 3% of your invested savings, allow you to pace the rest of your life to your own terms and conditions

Considering the sustained and surging popularity of stories such as this, results of the Easterlin paradox and this recent one, you’d think people would take to this concept of ERE, like ducks to water if someone cared enough and actually explained it to them?

Paradoxically and bafflingly, *NOT* seems to be the case. Below, you’ll find a list of common “objections” to ERE, followed by my own thoughts on the matter.

1. If everyone did this, nothing will ever get done and society will break down.
2. You are withholding your economic contribution of working for society and are instead “using” the work of others to finance your life.

A fundamental fallacy in this type of argument is a fixation with “circle of concern” (how can anyone profess to know how society will break down?) which no one can influence, or control, while conveniently and completely ignoring the inherently controllable “circle of influence” (what’s so hard about controlling *your own* savings rate?) (Stephen Covey’s new-agey phrases there).

To compound this is an added fallacy of the very same people’s total faith in saving 10% of their income into index funds that promise inflation adjusted returns in the distant future (30–40 years hence) even though “past performance is no guarantee of future results” is flashing in neon lights in all those discussions (This is prevalent PF-blogosphere thinking).

OK, getting slightly more serious, allegations of this nature are somewhat scary because, people don’t seem to realise that the fundamental premise of argument 2 is exactly what one Mister Karl Marx made, while critiquing Capitalism and simultaneously advocating the liberation of the proletariat. What we do know is that pretty much all of Karl’s ideas were unmitigated disasters(*) in implementation and practice. And recent events have also reinforced that unbridled capitalism can be just as disastrous. The beauty of ERE, however is that of one’s ability to make *hard* choices and therefore effect *real* changes in one’s own life in a very quick manner! Indeed, here’s food for thought: would this sort of lifestyle be possible (let alone a discussion of its possibility) in a communist country which practically forces everyone to “contribute to society”? Also note, that there is complete individual accountability in an ERE lifestyle because of the inherently clear and deep understanding of “need vs. want” before opening up one’s purse strings. Infantlilisation of public discourse and mass programming of mindsets through media has rendered any discussion on this topic mostly useless.

(*) In the interest of fairplay, the distinction between Communism and Socialism, in Howard Zinn’s words (scroll to end)

Mostly, a corollary objection also emerges to the above point, which I paraphrase below:

You’re very selfish, as you haven’t paid your dues back to the society that has *educated* you and continues to provide services (army, fire services, etc.) for you…

At this point, I usually sense a growing breakdown of communication. With a narrow world view, it is easy to take that line of thought, but a brief reading into history will tell us that education in the form we knew, grew as a public service in European medieval monasteries and was provided completely *free of charge*! Over centuries, this system has been progressively mangled, destroyed and hijacked to the form that we see now. My question is: Should we accept today’s world of specialised “price marked up” degrees as progressive, or those earlier days, when education was provided to all members as a free service? There are a lot of fundamentally flawed approaches in the propping up of modern society, and the sooner they are understood, challenged and resolved the better it is for future generations.
If it is our tax that ought to pay for an education system, shouldn’t it go all the way to ‘equip’ us to contribute to society? If so, can anyone explain why students carry so much debt when coming out of college? I posit that we’ve moved from a system of education to a system where too many “gatekeepers”(**) have started milking and gaming education out of greed.

As to those misplaced concerns about breakdown in army and fireservices; I say “misplaced”, because I see in such remarks, a lack of awareness of other alternatives and a belief that the prevalent social model is overarching in all forms and therefore worthy of full reliance on it. Briefly, I would like to point to the Switzerland for functioning “volunteer” models for both services mentioned, that any other country can freely adopt for its own needs. Indeed, I am willing to take a bet that several EREs will volunteer for such activities, as their lives no longer revolve around earning to pay for their own upkeep! And since this is my post, I am making one sweeping statement here: If everyone does adopt ERE, you won’t even need a colossal army to maintain “peace in Iraq” or maintain “shipping presence in Deigo Garcia island”, because an ERE lifestyle will thoroughly wean us off current levels of fossil fuel consumption, resulting in our not needing to “protect US interests” all the time 😛

(**) Analogy for “gatekeepers” being sneaked to artificially inflate a thing’s value in the eyes of people: Frederick the Great of Prussia faced the challenge of overcoming the people’s prejudice against the potato and accepting it as a staple food. So, Frederick used a bit of reverse psychology: he planted a “royal” field of potato plants and stationed a heavy guard (with explicit orders *not* to guard it well) to protect this field from thieves. Nearby peasants naturally assumed that anything worth guarding was worth stealing, and of course, this was entirely in line with Frederick’s wishes.

Thought: Is modern “education” valued because of the ‘value’ placed on it by “gatekeepers”, or does it really hold that much stead as most people claim? I am not taking an anti-education stance here. I want people to lower their lances and think a little bit critically for themselves! Also, I consider student loans as evil! Period.

Moving on, there’s something called Myers-Briggs Type Indicator that people should spend some time getting to know. Perhaps, it will bring an awareness about the fact that not all personality types gravitate towards a “collectivist” lifestyle. This is a distinction that carries a lot of significance. So, while it takes some time, find out what your own personality type is. Most people that answer the siren song of ERE would also answer to the roll-call of (add: rugged, highly, etc.. ;-)) “individualists”. And this is another predominant reason why ERE is bound not to become a “universal practice”. There are people who value strength in numbers, in conformity, and not having to take responsibility for their lives and their action. But, please know this. It wasn’t always like this. It’s a malaise of the industrial revolution. First and foremost, this is what history has now made of the two foremost industrialists that shaped our modern lifestyles and memes:

Edison preferred experimentation to theory, relying on meagerly paid “muckers” to test and implement his ideas. Ford treated his engineering staff the same way; many Ford engineers had surprisingly little training, and their job was not to think, but to follow Ford’s orders. For all that, Edison was widely considered America’s foremost genius, and many people described Ford in similar terms. (Source)

And now here’s an excerpt from Henry Ford’s autobiography, “My Life and Work”. Here’s what he said back then (emphasis mine)

There is no difficulty in picking out men. They pick themselves out because–although one hears a great deal about the lack of opportunity for advancement—the average workman is more interested in a steady job than he is in advancement. Scarcely more than five per cent, of those who work for wages, while they have the desire to receive more money, have also the willingness to accept the additional responsibility and the additional work which goes with the higher places. Only about twenty-five per cent. are even willing to be straw bosses, and most of them take that position because it carries with it more pay than working on a machine. Men of a more mechanical turn of mind, but with no desire for responsibility, go into the tool-making departments where they receive considerably more pay than in production proper. But the vast majority of men want to stay put. They want to be led. They want to have everything done for them and to have no responsibility. Therefore, in spite of the great mass of men, the difficulty is not to discover men to advance, but men who are willing to be advanced.

Paradoxically, Henry Ford paid the highest wages of his day (you can see I am alluding to Easterlin here) and still his workers ended up going on strikes!

7 users responded in " Guest post: ERE explained! – Part 1 "

Bravo – a good summary from a different POV that may sing to some of the yet to be converted. And yes, student debt is evil – it ties people in to working for the Man at an age where they may not yet have had exposure to what working to pay that sort of money off is like.

Great post. I really like the mention of the Myers-Briggs type indicator as something to consider. I think a lot about this because it’s obvious that different people gravitate toward different types of preferred interactions.
The idea that everyone could decide to embrace ERE is absurd. Some people simply wouldn’t want it. Looking forward to Part 2.

@antiratrace,
> The idea that everyone could decide
> to embrace ERE is absurd.

Actually, the post allows for the possibility that each and everyone has the capacity to enter ERE. Here, where it reads:
“please know this. It wasn’t always like
this. It’s a malaise of the industrial
revolution”

You have to break the existing mould of being in a constant earn-consume-earn cycle by seeing

a. what you consume
b. why do you want to consume/is it necessary
c. can you produce it yourself and have fun in the process?

and change the rules of the game as per your new knowledge. In fact even in the times of Mercantilism (Venetian skulduggery) in full flow, everybody in the town/village community was an entrepreneur. He was a producer of tangible items of tangible value as much as he was a consumer of similar tangible goods of value. His entire family unit ran as a small scale industry. And there was a very natural progression of affairs, the way it ought to be, IMO.

Industrial revolution (I think it was Ricardo’s theory) and its various ‘robber barons’ forced and foisted a different kind of thinking upon people.

Hence my bringing Henry Ford’s manner of treating his employees, followed by the paradoxical longing of independent thinkers while simultaneously putting down people in his biography 😐

On the farm, everything had all been mixed together. The family was a production unit as well as (at its best) a unit of affection and love. Almost as soon as they could walk, very young children participated in the work of the farm. Mom and Dad were in an economic partnership as well as in a romantic relationship.

Mom was a teacher as well as a parent. In a time when population density was low and people mostly got around on foot, many kids lived too far from school to get there on a regular basis. Home schooling wasn’t an oddity, and even when kids went to school, most of their real learning took place on the farm. Children on the American family farm were growing up to be farmers themselves. Learning to help Mom and Dad around the homeplace wasn’t an obstacle to their education; learning the myriad skills that farming required, from animal husbandry to market strategies to folk doctoring to weather forecasting to making clothes to building a barn was what education was all about. The Three R’s that you studied in school (readin’, ritin’ and ‘rithmetic) were special and useful skills, but learning skills like making soap and folk doctoring took more energy and time. School was not where life’s most important learning went on.

In any case, to work was to learn, to learn was to work. In Audrey’s suburban paradise, learning is only a vestigial part of what kids do around the house. Home is where the family watches television together.

In fact I say this (with some pride of course) that while the ERE community has picked up and used this knowledge it is only now that commentators are acknowledging this facet of our History as an inherently good thing.

I love the post and love the comments that followed. I am a daily reader of your blog at work. I get paid hourly to sit in either a cubicle or a filing cabinet room to myself (as I am now currently at). Either one is considered a Prison until i break free of it. Mon & Fri, I have the room to myself which is a great feeling of isolation and allows me to be creative and ignore the conscious mindset and forced milestones of “Work”. I am saving at an 80% rate to release my chains. After graduating from college at 22, with only $14k in student loans( Very Evil Enslavers those deans of colleges, but it’s not entirely their fault either, aim higher, even professors would be willing to work for free to teach and contribute to the minds of the human race), and landing a high paying “Job”; I began to research and learn about investing, savings, freeing one’s material bonds, starting your own business, the stock market, the world markets, etc. All the things that no one in any of my former education mentioned to me about. The main goal of my entering College was to learn and challenge my understanding of everything especially in Science. But the world is preventing me from discovering/experimenting/challenging beliefs and theories. It feels as though other Evil governments and people with Tremendous Secretive Power are holding chains on everyone and have been since the beginning of man. Everyone does someone else’s bidding who has the power over you, whatever that may be, from running a nuclear power plant for the shareholders and customers demand of electricity, or to be a underpaid pornstar to a perveted porn director and many paying customers. In the end whatever your “Job” (if you can get one); 95% of the world’s people are trapped in a cycle and can’t get out of it. In your mind and in the minds of your relationship counterparts, you are told that “Work” and getting a “Job” are goals that one must maintian throughout their lives, if they want to be normal, and be that “must-have-great-man/lady”!!! You are told by contolling media that “Maybe, if lucky enough you will “Retire” (be free) by the dying age of “let’s make it 67 now, hahaha!!!” so we can then tax their Over savings/inheritance that they will never get to spend!” Sadly, men and women follow this despairing life because they are led into it by Powering Bastards. This is not accomplishing anything for the human race, but giving glory to the jerks who control you. If you had all the money in the world, and someone took a sword to your thoat and asked you to “Work” for Life, would you think that’s any better of a scenario than being in a subconcious daily habit spending cycle? “Work” is the same as “enslavement”. Sadly the objective is to be the Enslaver, by either ways of a gun, a sword, a group of soldiers, a business,or a loan service. The Enslavers are saying they’ll give you $100k (a tree they found in your own backyard) at 5%+ interest for 30 years+( mind you this is money you all gave to them for a piece of mind to keep “secure” in their banks.) People not the government took America by guns and killing of innocents. Chosen People decided to place taxes on other non chosen people or throw them off their lands. Laws were placed by Enslavers (the chosen) to protect their own businesses/land which they took by gun/sword. Taxes, overpriced real estate, and debt are endless cycles we all pay to keep enslaved to whom and for what? I will work toward financial freedom, but i am learning these lessons along the way. One day i and hopefully others will rebel against the Enslavers by force or with their own mind games and debt games. Evil must be overthrown, and the world must be set free of it’s financial chains to any one person or group of people. Only then can we advance forward as a human race. Open your eyes, and don’t spend, be creative and give to others once you have learned to be self-sustaining and not greedy or materialistic. Fight for your Freedom whether financially or politically!

Excellent Summary of what Early Retirement Extreme is all about. When I stumbled across this site I was instantly hooked. The blog has changed the way I think and shifted my paradigms into thinking long term. I am on the road to financial freedom thanks to this site.

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